Is there any foodstuff as dodgy as olive oil? Human beings have been defrauding and occasionally poisoning one another with the stuff – or simulacra of it – since the beginning of cooking. You may fairly picture a Sumerian house-spouse 5,000 years ago frowning at an amphora and saying: "The guy said he actually cold-presses extra virgin olives in his own kitchen. Funny taste, though…" Luckily, according to the cuneiform tablets discovered at Ebla, the Sumerians had a royally appointed olive oil fraud brigade.

That's the sort of thing we need now, when the profits in olive oil crime are, as one EU official puts it, "comparable to cocaine trafficking, with none of the risks", and the regulations less effective than at any time in the last two millennia.

Tom Mueller, in this eye-popping investigation, makes a convincing case that the fraudsters are busier and richer now than ever before. Key to their success is the confusion, snobbery and ignorance that shroud the product. I have a little experience of this: I conducted a blind tasting of extra virgin olive oils a few years ago for a national newspaper that wanted "the truth on expensive olive oil".

We had a dozen oils, and a panel consisting of an importer, an Italian deli owner and a couple of eminent foodies: the results were so embarrassing and confusing the piece was never published. The importer went into a fugue after he was informed that he'd pronounced his own premium product "disgusting"; the deli owner chose a bottle of highly dubious "Italian extra virgin" as his favourite (it had cost £1.99 at the discount store TK Maxx); and both the foodies gave a thumbs-up to Unilever's much-derided Bertolli brand.

The story of the latter, a market leader here and in the United States, provides a good tour of the rottenness in the trade. The Bertollis were bankers and traders who never actually owned an olive tree, despite the bucolic Tuscan scenes depicted on their labels. They got rich on the back of the incomprehensible twist in European law that, until 2001, allowed any olive oil bottled in Italy to be sold as "Italian olive oil", which, absurdly, is what we all pay most for. In fact, even now 80% of the oil Bertolli uses comes from Spain, North Africa and the Middle East. It it is still flogged in bottles with "Lucca" and "Passione Italiana" on the label. Today, Italy still sells three times as much oil as it produces.

More serious – for aficionados and olive farmers – Bertolli and its supermarket rivals corrupted the meaning of extra virginity, a controlled definition of high-quality oil since 1960. "Gentle", "smooth" and "not peppery on the throat" are the sort of words Bertolli and its rivals used in ads promoting their generic extra virgin oil. But true extra virgin oil is peppery – it bites the back of the throat so fiercely it can make you cough. The flavours are vivid. "Peppery" is an official, positive attribute of "extra virgin" whereas smoothness will reliably indicate a low-quality oil.

So Bertolli and the other brands came to need low-quality oils in order to produce an expensive one. That suits them, naturally, but it is ruinous to people trying to make and sell the proper stuff. And it suits the fraudsters, who, for millennia, have been passing off oil from all sorts of plants as that of olives. The deodorising and cleaning techniques that are used to render seed oil or even oil chemically extracted from the stones and twigs of olives produce a very bland oil.

It has become almost impossible for the processors to tell when they're being sold fake oil and, as one sadly tells Mueller, even harder for them to sell good oil for a reasonable price: "When a customer tries a robust oil, they say, 'Oh no, this is a bad oil!' He's become used to the flat taste of the deodorato." As a result, 70% of cheaper extra virgin oil sold is a fraud, according to Mueller – though that doesn't harm the big guys. And so the Bertolli family sold up to Unilever, a company that got rich turning waste animal fats and whale oil into margarine. (Unilever has now sold Bertolli to Spain's biggest oil corporation.)

It is an appalling and comical mess, which Mueller sees largely in terms of honest, hard-working farmers versus slippery businessmen. He interviews prime examples of both. But you could tell the same story of almost any artisan's product we put in our mouths, from bacon to cheddar cheese or smoked salmon. Industrial production techniques and the supermarket's tendency to strip out quality in order to give "value" will debase any foodstuff once it becomes popular to the point where the producer has to abuse his animals, sin against tradition or commit fraud in order to stay afloat.

It is a depressing story, without any obvious remedy, but it is only half this greatly entertaining book. Mueller, an American who set up home in Liguria, tells a gripping story of the rise of olive oil to the point where it symbolises civilisation – whether in the minds of a Roman legionary miserable in the lard-eating German outposts of the Empire, or on an aspirational dinner table in middle-class northern Europe or America today.

Olive oil runs through Mediterranean culture. It had a place in religious rituals, cooking, lighting, cleaning, medicine and, of course, economics. Mueller makes a case – or at least he finds an academic who will – for olive oil's central role in pederasty in ancient Athens. Across the ages, the cool green oil flows, past an unchanging cast of cranks, crooks and fanatics. The Romans, says Mueller from the top of Monte Testaccio, a hill by the Tiber made of discarded oil amphorae, policed olive oil better than we do. They probably used it more sensibly, too: most of what we eat today on the cheap is actually lampante – oil of a grade they deemed suitable only for lighting their houses.